This paper aims to make a contribution to the ongoing debate in Kenya and the East African Community (EAC) about sub-standard drugs, access to medicines, local pharmaceutical production, and the role of IPRs enforcement and drug regulatory laws.

The United Nations Conference on Trade and Development (UNCTAD) and the United Nations Industrial Development Organization (UNIDO) collaborate on a global project to strengthen pharmaceutical production in developing countries and least-developed countries (LDCs). Within this context, UNCTAD assists in the implementation of flexibilities in intellectual property (IP) rights available under the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The full use of TRIPS flexibilities to protect public health, and, in particular, to provide access to medicines for all, is a target under Sustainable Development Goal 3 (“Ensure healthy lives and promote well-being for all at all ages”).

The availability of TRIPS flexibilities creates the legal space for the production of generic medicines, and may thus provide important incentives for foreign generic firms to invest in a country’s domestic pharmaceutical sector. UNCTAD considers the use of TRIPS flexibilities as an important element to promote generic pharmaceutical investment and domestic enterprise development under sustainable investment policy frameworks. In order for such frameworks to be coherent and effective, policy makers should avoid discrepancies between the use of TRIPS flexibilities, the enforcement of intellectual property rights (IPRs), and domestic laws and policies on drug regulation.

Overview of Policy Recommendations

• Recommendation 1: In the course of the current revision of the Kenyan AntiCounterfeit Act, the definition of “intellectual property rights” in Section 2 of the Act should be amended to only cover trademarks and copyrights and related rights. The Anti-Counterfeit Act should not apply to patents, in line with the minimum standards of the TRIPS Agreement and recent changes under Uganda’s 2015 version of the Counterfeit Goods Bill.

• Recommendation 2: The definition of “counterfeiting” in Section 2 of the Act should be redrafted, following the definitions of “counterfeit trademark goods” and “pirated copyright goods” in Article 51 of the TRIPS Agreement. The new definition should not apply to foreign IP rights or to activities undertaken abroad, in line with the principle of territoriality that governs intellectual property law.

• Recommendation 3: From a public health perspective, the existing drug regulatory laws appear sufficient to address the mislabeling of drugs that creates confusion about quality or other drug characteristics. There is no need to expand the scope of the Anti-Counterfeit Act to cover issues of product quality. Efforts should focus on upgrading the drug regulator’s capacity to enforce quality standards under domestic regulatory laws.

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Overview: Anti-Counterfeit Legislation in the EAC

In 2010, the EAC Secretariat made available to Partner States an EAC Anti-Counterfeit Bill as drafted pursuant to a consultancy by two Nairobi-based law firms. The 2010 version received comments from Partner States’ governments and underwent a number of minor modifications. Consultations between the EAC Secretariat and Partner States then proceeded on the basis of the 2011 version of the Bill. In April 2015, however, the EAC Council of Ministers decided to discontinue the enactment of a separate law on anti-counterfeiting and instead placed draft provisions on counterfeiting within an amendment to the 2006 EAC Competition Act. The amendment applies anti-counterfeiting measures to protect trademarks and copyright, but not patents.

The EAC Competition Authority will have the power to harmonize the national legal frameworks on counterfeiting and piracy in the region. Partner States will be obliged to establish or designate an institution responsible for anti-counterfeit matters, and to enact laws prohibiting the manufacturing or production, the possession or control in the course of trade, the sale, hire, barter or exchange, or the distribution of counterfeit goods for trade. They should also prohibit the importation into, the transit through, transshipment or export from a Partner State. As a safeguard for access to medicines, the amendment provides that its provisions shall not be construed as prohibiting the manufacture, importation, sale or dealing in medicinal products generally known as generic medicines provided such medicines are not counterfeit goods.

In Uganda, as of March 2015, the latest version of the Counterfeit Goods Bill was with Cabinet after a number of changes made by the Parliament. Local civil society and the Ministry of Industry, Trade and Cooperatives played an important role in amending a previous version from 2009 to better reflect concerns related to public health and generic competition.

Tanzania adopted the Merchandise Marks Regulations in 2008, which contain provisions on counterfeiting.18 Patent legislation in Tanzania is divided between Tanzania-Mainland and the island of Zanzibar. In an effort to implement TRIPS Agreement public health-related flexibilities, Tanzania-Zanzibar adopted the 2008 Patents Act, which in cases of patent infringement and counterfeit trademarked goods provides for remedies comparable to TRIPS Agreement minimum standards. Tanzania-Mainland still relies on the pre-TRIPS Patents Act of 1995.

The Definition of “Counterfeiting”

The Kenyan Anti-Counterfeit Act in Section 2 states that:

“Counterfeiting” means taking the following actions without the authority of the owner of [the] intellectual property right subsisting in Kenya or elsewhere in respect of protected goods –

(a) the manufacture, production, packaging, re-packaging, labelling or making, whether in Kenya or elsewhere, of any goods whereby those protected goods are imitated in such manner and to such a degree that those other goods are identical or substantially similar copies of the protected goods; (b) the manufacture, production or making, whether in Kenya or elsewhere, the subject matter of that intellectual property, or a colourable imitation thereof so that the other goods are calculated to be confused with or to be taken as being the protected goods of the said owner or any goods manufactured, produced or made under his licence;

[…]

(d) in relation to medicine[s], the deliberate and fraudulent mislabelling of [a] medicine with respect to identity or source, whether or not such products have correct ingredients, wrong ingredients, have sufficient active ingredients or have fake packaging; Provided that nothing in this paragraph shall derogate from the existing provisions under the Industrial Property Act.

Paragraph (d) on medicines was not part of the original draft provision. It was added to respond to concerns voiced about the impact the definition especially in paragraph (a) may have on the legitimate generic production of medicines. The chapeau to the provision establishes that the authorization from the IPR holder shall be the key criterion for determining counterfeiting, and paragraph (a) inter alia refers to the manufacture of goods that are substantially similar copies of protected goods. This could encompass the production of generics, especially as Section 2 provides that the notion of “intellectual property rights” includes “any right protected under the Industrial Property Act, 2001” (i.e. especially patents).

It is obvious that without the subsequently added paragraph (d), the broad definition of “counterfeiting” particularly in paragraph (a) would have encompassed activities by generic producers that do not necessarily meet the patent right holder’s approval. Such activities could relate to the use of the regulatory review exception for early generic market entry and especially the marketing of generic copies during the patent term in cases where the generic producer has reason to believe that the right holder’s patent is weak and may be challenged in infringement litigation. Consequently, generic producers engaged in these legitimate activities would have been exposed to criminal sanctions, which are triggered by activities that meet the definition of “counterfeiting” (see section on applicable remedies below for details).

Paragraph (d) of the above-quoted Kenyan definition of “counterfeiting” was drafted along the lines of the WHO’s definition of spurious/falsely-labelled/ falsified/counterfeit (SFFC) medicines. Its relationship with paragraph (a) of the provision is not obvious. In particular, it is unclear to what extent the unauthorized manufacture of copies of protected goods may still apply to generic producers’ activities, or whether paragraph (d) excludes paragraph (a) in the context of medicines. This ambiguity may have been the result of hasty drafting. In any case, it was criticized by the Kenyan High Court in its 20 April 2012 decision as not providing a sufficient safeguard for the right to life, dignity and health against IP enforcement actions targeting generic medicines. The Court drew the conclusion that Section 2 of the Anti-Counterfeit Act threatens to violate the petitioners’ right to life, human dignity and health as provided under Kenya’s Constitution.

The March 2015 version of the Ugandan Counterfeit Goods Bill removed patents from its scope of application, thereby addressing concerns that legitimate generic trade could be qualified and sanctioned as “counterfeiting.” Under the older, i.e. 2009 version of the Bill, the definition of “counterfeiting” was essentially a copy of the Kenyan definition, stating that:

“Counterfeiting” means without the authority of the owner of any intellectual property right subsisting in Uganda in respect of protected goods – The manufacturing, producing, packaging, repackaging, labelling or making, whether in Uganda or outside Uganda, of any goods by which those protected goods are imitated in such manner and to such a degree that those other goods are identical to or substantially similar to protected goods; […] (c) In the case of medicines, includes the deliberate and fraudulent mislabelling of medicines with respect to identity or source, whether or not such products have correct ingredients, wrong ingredients, have sufficient active ingredients or have fake packaging. [emphasis added]

As in the case of the Kenyan definition, the relationship between paragraph (a) and the specific paragraph on medicines was unclear. In the case of Uganda, the situation was made even more difficult by the use of the term “includes” (see italics in the above text), which is not used in the Kenyan provision. This could have been misunderstood as implying that paragraph (a) regarding manufacturing activities still applied in addition to paragraph (c), thus qualifying generic producers’ activities as counterfeiting. The criticism advanced by the Kenyan High Court (see above) applied to an even greater extent to this Ugandan draft provision. As in Kenya, the definition of “intellectual property rights” in the Ugandan Bill also included patents, thus potentially targeting generic pharmaceutical production activities. Finally, the Tanzanian 2008 Merchandise Marks Regulations have also raised concern as to potentially creating confusion between legitimate generic activities and IP infringement.

A striking feature in the Kenyan definition of “counterfeiting” is the extra-territorial application of IPRs existing in Kenya to activities occurring in third countries. According to the original drafting of the definition of “counterfeiting” in Kenya, an IPR holder in Kenya could have qualified manufacturing activities in a third country, such as for instance India, where its product enjoys no IPR protection, as “counterfeiting.” Domestic subsidiaries of these foreign manufacturers operating in Kenya would potentially have been exposed to sanctions related to “counterfeiting”, such as criminal remedies (fines and imprisonment). Considering the important presence of particularly Indian generic investors in the EAC Partner States, this could have a serious impact on decisions related to foreign investment in EAC Partner States.

Finally, a unique issue under Kenyan legislation is the application of Kenyan IP enforcement to protect foreign IP rights. Section 2 of the Anti-Counterfeit Act defines “counterfeiting” as taking certain actions without the authority of the owner of the IP rights subsisting in Kenya or elsewhere. The idea of enforcing foreign IP rights is in contradiction to the principle of territoriality that underlies IP law. This principle makes particular sense in the area of IP enforcement. Foreign rights holders would otherwise be entitled to claim enforcement of their foreign rights even if they do not meet the substantive requirements of protection under Kenyan IP laws. This would disregard the balance of interest between the protection of exclusive rights and the contribution that the IP owner should make to society. In practical terms, it would be very difficult for Kenyan authorities to know if certain rights not protected domestically are protected abroad. In addition, importers and consumers that rely on the fact that certain products are unprotected in Kenya may find themselves subject to IP enforcement because of foreign rights that they were unaware of. The need to respect the principle of territoriality should be reflected in an amendment to the current definition of “counterfeiting” in the Kenyan Anti-Counterfeit Act, as suggested below (Recommendation 2).